S-08- Loss of Profits Insurance Mock Test 15
S-08 Loss of Profits Insurance covers Business Interruption, Consequential Loss, underwriting, reinsurance, and ALOP/DSU concepts. The chapter explains calculation of sum insured from business accounts, standing charges, gross profit, turnover, indemnity periods, and minimum time exclusions. It covers Increased Cost of Working, survey assessment, policy conditions, and claim settlement. Underwriting focuses on proper risk classification, policy modification, and risk selection. ALOP/DSU provides protection against revenue loss caused by delays in project start-up. Progress reports, project delays, and financial viability are important considerations. Reinsurance concepts such as treaty and facultative reinsurance also support insurers in managing accumulated and large risks.
1. What is the Minimum Time Exclusion for Power Plants (both captive and public) under MLOP policies?
a) 7 days
b) 10 days
c) 12 days
d) 14 days
e) 21 days
2. What does Important Note 1 about Progress Reports require the insured to do under ALOP/DSU insurance?
a) Submit progress reports only when a claim arises
b) The insured shall take all reasonable steps to complete the works as scheduled, provide the insurer with updated progress reports at intervals stated in the schedule. The progress report should show progress on insured contract(s) in relation to contractual programme, identify any delays or potential delays in terms of potential claim, any measures to minimize delays, and if there is a difference between anticipated and actual progress, an endorsement on DSU policy must be obtained
c) Submit annual progress reports to the insurer
d) Provide progress reports only to the main contractor
e) Submit progress reports only after completion of the project
3. How can a submission become acceptable by amending policy terms and conditions?
a) By reducing the premium to make it affordable
b) By amending the policy to exclude certain causes of loss, add or increase a deductible, or make another coverage change
c) By extending the policy period
d) By removing all exclusions from the policy
e) By changing the named insured on the policy
4. What does the note state about the list of Standing Charges examples in Chapter 4?
a) The list is exhaustive and covers all possible standing charges
b) The list is mandatory and all items must be included
c) The list is only illustrative and not exhaustive
d) The list is only applicable for manufacturing businesses
e) The list is set by government regulation and cannot be changed
5. What is Facultative Reinsurance?
a) Reinsurance that covers all policies automatically
b) Reinsurance that covers an insurer for an individual or a specified risk or contract; if several risks or contracts need reinsurance, they are renegotiated separately and the reinsurer holds all rights for accepting or denying a facultative reinsurance proposal
c) Reinsurance that is mandatory for all insurers
d) Reinsurance that covers only property risks
e) Reinsurance that covers only large corporations
6. In Case Study 7, why is the claim payable to the Cold Rolling Mill even though there was no loss of production or turnover?
a) Because MLOP policies always pay without requiring production loss proof
b) The insured was able to arrange for a Similar Gen Set on Rent of Rs.10,00,000 per month which maintained production. Had the insured not made this arrangement there would have been total loss of production/turnover and the loss under MLOP policy would be much higher. The Increased Cost of Working is a built-in cover under the Loss of Profit Insurance and the rent paid for the Generator is payable as ICOW
c) Because the DG set was insured under a separate policy
d) Because the Cold Rolling Mill is a priority industry under government rules
e) Because the insured had a no-loss guarantee under the policy
7. What does Treaty Reinsurance mean?
a) An individual risk-by-risk negotiation for each policy
b) A government-mandated form of reinsurance
c) A reinsurance treaty means that the ceding company and the reinsurer negotiate and execute a reinsurance contract under which the reinsurer covers the specified share of all the insurance policies issued by the ceding company; the reinsurance contract may obligate the reinsurer to accept all contracts within scope (known as obligatory reinsurance)
d) A reinsurance arrangement that only covers catastrophic losses
e) A reinsurance arrangement that only covers proportional risks
8. How is the Sum Insured computed under Consequential Loss Policy?
a) The sum insured is a fixed amount decided by government
b) The sum insured is the same as the material damage sum insured
c) The sum insured must equal exactly one year's turnover
d) The sum insured is to be computed from the insured's accounts – Trading and Profit and Loss accounts
e) The sum insured is determined solely by the agent
9. What is the title of Chapter 4 in S-08 Loss of Profits Insurance (For Surveyors)?
a) Fire Consequential Loss Insurance - I
b) Fire Insurance Claims Settlement
c) Fire Risk Assessment and Underwriting
d) Fire Damage Estimation and Valuation
e) Fire Policy Conditions and Exclusions
10. Miscellaneous standing charges not exceeding what percentage of the total amount of the aforesaid insured standing charges are allowed?
a) 1 percent
b) 3 percent
c) 5 percent
d) 7 percent
e) 10 percent
